Investing

One thing to consider is once you start getting ahead financially is to develop a strategy with the extra income you have acquired. One of the best things you can do is think about getting your money working for you.

First let me say I am not a professional financial adviser and nothing I say should ever be taken as financial advice or endorsements of investments. It is simply information about what I personally do and how I feel about my own investing. Every investor is different depending on their circumstances and you should speak to a qualified adviser about your own investments.

Investing your extra income is one of the most intimidating things people can do who are not familiar with investing. Most people are at first only normally exposed to the stock market when they hear about it on the news. This only really happens when there is a correction in the market or the stock markets crash like in 2008. The problem with this is people are not shown the upsides of investing their money and their wealth ends up being eaten by inflation instead of growing.

It is totally understandable for people to be wary of investing. Hopefully this website can give you some tips on making your money work for you, with a little thought and a little understanding investing your money is not so intimidating.

Here are some tips I have learned over the years.

Build a fake portfolio first. UPDATE: google finance recently discontinued their portfolio feature making this obsolete. There are other free services to use to build portfolios I will list in future updates.

Here is something simple you can do right away. Go to Google Finance and build a portfolio. I watched stocks for a long time before I stated investing. Watch the stocks and see how they move to determine when is a good to time to buy and sell. Also, watch what kind of dividends stocks pay and how they add up so you can reinvest those earning. You can help you learn a lot before starting to invest and will give you great tips on how to start to build the portfolio you want.

Diversify your portfolio

This is definitely personal and how you choose to do this depends on your risk level. I am not an expert but for me I tend to build my portfolios off of safer “blue chip” type stocks first. So I might have a larger percentage of my extra income in stocks I consider safe but give modest returns. I then layer shares in sectors like energy, mining, forestry or technology. Each has their ups and downs. Mining for example is very dependent on the price of the material mined. If you own gold mining companies and gold crashes, they will be affected. You can also diversify within a sector, so having more secure gold mines in that section of your portfolio with a few higher risk and higher return companies. Also look into if ETFs are right for you. These are groupings of stocks that are bought as one. Say for example you would like to buy into oil recovery as you feel the energy sector will soon recover and be a good investment. An ETF that groups several oil producing companies together will give you exposure while minimizing the risk if a single company has an issue. The drawback is that you do pay a fee to own ETFs and so do not always see the equivalent returns. As such I tend to just build my own group of companies per sector. But it is something to look into.

Don’t get too emotional

Panic is not your friend in the stock market. Understanding when and if to pull money and take a loss is a hard decision. But there times when it is prudent to take a loss and move your money elsewhere. But trying to get ahead of stock prices can do nothing but cause anxiety. When I first began trading I would sell a stock I think was falling only to see it reverse and begin to climb back up. Sometimes doing the opposite of what you think they should be doing. It is why I am a believer in buying and holding long term for many novice investors. Buy good quality companies that pay dividends and just hold them for the long run.

The experts

My own personal  experience with financial advisers has not been a positive one. However I do feel that advisers can be a very important part to understanding your investment options for some people. When choosing an adviser really get a good handle and understanding of the fees involved with that adviser. I personally am self directed in all my investments but I do belive there are some great professionals out there that depending on your circumstances could be a good fit for many people.

Where to invest

I invest through my bank. I know people who also invest through their local bank (Canadian) as well as friends who invest though places like Quest Trade. Wherever you go just make sure it is a reputable place to put your money. The costs I see per trade vary from $6.99 to $9.99 for every trade. Fees may be varying depending on services, or your status at the institution. However I have heard of people who have had to pay large sums to trade, and it really should not cost you much more that stated above. Explore your options but don’t be afraid of self-directed options, they really are not as complicated as people think. For many Canadian a TSFA or Tax Free Savings account is an amazing tool to help further their investment goals. More about TFSA’s here

Other types of investments

Investing of course is not just investing in companies in the stock market. You can invest in bonds, or property or any number of things. I do invest a little in physical Gold and Silver as a way to diversify. Sometimes investing is just looking at things differently. I personally buy Gold and Silver because it is another form of diversification, it hedges against inflation and well, it is kind of fun. But I do not put large amounts into it. I am going to write a separate post on Gold and Silver buying later that I will post more about my experiences with coins, bars and my source for buying it.

Update: https://extraincomehub.com/buying-gold-and-silver

 

 

Ultimately your choice of investments and risk will be determined by your age and goals with the money invested. But whether you favor stocks or bonds or property, starting to think about where to put your money is a smart decision. Do your research, read, plan and put your money to work.